Honorable Jane Nelson, Chair, Senate Committee on Finance
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
SB1105 by Hughes (Relating to the resumption of employment by certain retirees within the Texas Municipal Retirement System.), As Introduced
COST ESTIMATE
The bill would amend Government Code Section 852.108 to allow a retiree to be re-employed by the same city after a waiting period of 12 consecutive months without forfeiting their benefits while re-employed. This would be a decrease from the current waiting period of eight years.
Re-employed individuals whose benefits were forfeited before the effective date of this bill, and were retired for at least 12 consecutive months, would be able to file a written application with the Texas Municipal Retirement System (TMRS) board to resume the payment of their benefit. The resumption of the member's benefit payments would begin the month following the month in which the application was approved. In addition, if the retiree had at least an eight-year break in service prior to becoming re-employed, the retiree will receive all previously suspended monthly retirement benefits in a lump-sum payment.
The actuarial analysis states the bill would not have an actuarial impact on TMRS as a system because the funding requirements and any potential cost impact are the responsibility of individual TMRS participating cities. The analysis further notes that the bill would not have any meaningful actuarial impact on any TMRS participating city either. Due to the requirement that the retiree must be retired for one full year, it is not anticipated that the bill would significantly change retirement behavior of TMRS members.
TMRS has indicated that the bill would impact 200 retirees who are currently re-employed and would become eligible for benefits to be reinstated. The Pension Review Board's (PRB) actuarial review states that this would not be large enough to have a noticeable impact to the system. Also, the actuarial analysis notes that TMRS' actuarial model does not assume any member that retires will return to employment and have their monthly benefit forfeited under the current provisions. Since none of the forfeited payments are preemptively recognized in the valuation, the elimination of the forfeiture will have no impact on the plan's current liabilities.
SOURCES
Actuarial Analysis by Mark R. Randall, MAAA, FCA, EA, and Joseph P. Newton, MAAA, FSA, EA, Gabriel, Roeder, Smith & Company, April 8, 2021. Email correspondence by PRB staff actuary, Kenneth J. Herbold, ASA, EA, MAAA, April 9, 2021.